CDMA operators rev up Nigeria mobile market
By Segun Oruame
GSM (Global System for Mobile) networks dominate Nigeria telephone
market of some 70 million subscribers. But market is geometrically
expanding for Code Division Multiplex Access (CDMA) operators in
what could portend a major shift in market value in terms of
subscription and reach.
Practically all Nigeria CDMA operators with unified licences
allowing national roaming have recorded exponential growth in the
last three years in terms of geographic spread and increasing
numbers of subscribers. The bait is in lower cost of access and
lower cost of talk. Access to CDMA services which comes bundled with
the handsets are nearly 40% lower the cost of accessing GSM services
depending on the choice of handsets. Cost of talk is lower than 30%
and in some cases, 50% less than talk on GSM services.
According to Pyramid Research, “the number of mobile CDMA
subscriptions in Nigeria grew from just 380,000 in 2007 to more than
6m at year-end 2008 — that’s from 1% to 9.6% of all mobile lines in
just one year. The top three GSM mobile operators are expected to
keep their grip on the mobile market because the total number of GSM
subscribers also increased by about 56% in the same period, but they
will face increasing competition from CDMA operators. This means the
trio will generate 64% of Nigeria’s telecom revenue in 2014, down
from their 74% share in 2008.
By year end of 2009, CDMA operators have climbed up higher on the
scale recording over 9 million subscribers with a greater reach than
earlier envisaged opening services in several states of Nigeria’s 36
states to make it about the fastest growing. They are generally
regarded top on voice quality and considered most reliable in the
delivery of mobile Internet. Most analysts think better performance
has to do with lower subscribers’ load on the existing networks
unlike GSM operators that daily contend with weaker infrastructural
capacity to sustain quality on the heavy load of subscribers.
CDMA operators are steadily filling the gaps left by moribund
state-owned Nitel which fixed-infrastructure has deteriorated over
time due to a mix of management, ownership and fund crises. While
Nitel sinks, CDMA-based fixed-wireless operators in Nigeria are on
the rise revving up services in major towns, semi-urban and remote
locations where Nitel as a national publicly-owned carrier once held
sway.
Entering the fast gear for CDMA operators such as Starcomms,
Multi-Links, Visafone and ZOOMmobile started with the upgrading of
their “regionally based licenses to unified access service licenses
(UASLs) in 2006, allowing them to extend their reach beyond
traditional geographical limits and compete in both the fixed and
mobile markets. It’s therefore not surprising that these operators
have gladly extended their services into mobile markets and now pose
a threat to the three established GSM-based operators, MTN, Zain and
Globacom, both in terms of chipping into their revenues and
snatching GSM subscribers,” as Pyramid Research rightly observed.
“The future belongs to CDMA. GSM may lead the market now but the
greater capacity in GSM to offer lower cost services without
undermining quality gives it an edge,” says telecom analyst and
former Nitel engineer Titi Omo-Ettu.
CDMA operators have shown greater sense of maneuvering in Nigeria’s
price sensitive market where subscribers easily get baited by lower
cost of talk. Outside of Lagos and other commercial centres,
Starcomms, Multi-Links, Visafone and ZOOMmobile have won tremendous
marketplace acceptance threatening to upstage the older and more
established GSM players. The carrot is the lower charges.
“I used to have two GSM phones but I only use one now since I
started using Multilinks and I use my Multilinks more often,” said a
subscriber in Jos city inside central Nigeria. IT Edge News. Com
findings across Nigeria in most locations having between 50, 000 and
500, 000 population indicates a greater acceptance of CDMA phones
over GSM even when subscribers uses the two technologies. Income is
a critical factor. In the so-called civil service towns such as
Makurdi and Enugu, where there are minimal commercial activities,
lower cost of talk holds a greater attraction.
As Pyrammid Research Put it, “the advantage that the CDMA operators
have in Nigeria is that they are able to charge lower on-net and
off-net call charges than GSM operators. Also, CDMA operators have
fewer subscribers and less strain on their networks, which means
they can provide better service quality.
“They also provide very cheap and partly subsidized mobile handsets
that will appeal to the low-end market, especially those who have
never been able to afford a handset. For instance, Visafone launched
services in March 2008 and started selling handsets at ridiculously
low prices, starting at just N2000 ($13.80). The operator’s customer
base jumped from just 60,000 subscribers in March to 2.25m at the
end of 2008, with the majority purchasing handsets for the first
time.”
Tendency to enter under-covered areas is a working recipe for CDMA
operators. Their decision to get less aggressive in the saturated
markets of Lagos and Port Harcourt I for instance, and pursue
business in green areas outside of commercial centres have helped to
keep the growth margins high. In those less-commercial locations,
CDMA operators have helped to popularize mobile Internet revving up
Internet usage with greater speed than most GSM networks could
provide. Multilinks Internet service is particularly popular outside
of Lagos.
“I believe the key to success for CDMA operators and the reason why
they are becoming more popular in Nigeria is their strategy to
penetrate into rural, underserved communities and to provide
affordable, effective services that appeal to the less fortunate
among Nigeria’s 146m inhabitants,” said analyst Yejide Onabule.
By Pyramid projections, CDMA networks will be jumping over the 29%
market share by 2014. “ In 2008, mobile CDMA service accounted for
an estimated 6.3% of the market’s $8.6bn in total revenue, and we
expect this share to grow to 11% by 2013. We also expect that,
barring major changes in market conditions, CDMA operators will grab
20% of mobile subscriptions by 2014. Our Country Intelligence Report
on Nigeria provides more comprehensive insight into the country’s
communications market.”
COUNTRY FACTS
Nigeria is one of the most attractive markets in Africa and the
Middle East — the fourth largest in the region in terms of mobile
revenue. Pyramid Research expects Nigeria's total telecom revenue to
increase from an estimated US$8.42bn in 2008 to $11.14bn in 2013.
Resolution to the Nitel/Mtel crisis and fixed infrastructure rollout
will reignite the slow growth in the fixed segment, but the bulk of
service revenue will continue to come from mobile.
